Offshore Accounts & New Treaties

The United States Senate may be the only thing standing in the way of your Swiss bank facing the maximum pressure to provide information about your personal account details to the tax enforcement division of the Department of Justice (DOJ).

In 2009, Switzerland and the United States entered into a new tax treaty that would amend Article 26 of the existing treaty between the two countries signed in 1996. The amendment aims to implement a standard from the OECD Model Tax Convention requiring banks to provide any information “foreseeably relevant” to an investigation into efforts to evade U.S. tax obligations.

Without this amendment in place, many Swiss banks have routinely relied on strict privacy laws in Switzerland to keep account information confidential. Although this is already changing dramatically as banks turn over accountholder details to avoid criminal prosecution, if the U.S. Senate ratifies the 2009 treaty, the DOJ will have considerably more authority and power to go after banks and get information about possible tax evaders.

Senator Rand Paul is leading the charge against ratification as a result of privacy concerns, but ongoing efforts are underway to move the Senate forward on ratifying the treaty, including recent testimony by the Acting Attorney General for the DOJ’s Tax evasion at a House Judiciary Regulatory Reform, Commercial and Antitrust Law Subcommittee hearing.

Regardless of whether the treaty is ratified or not, accountholders who have undeclared offshore funds have plenty of reason to be worried. Banks are routinely providing details to the DOJ now, and your bank could be the next one to give up your information to protect itself from criminal prosecution.

Contact a Boston criminal tax lawyer for assistance understanding the implications of DOJ efforts to crack down on banks and to get help exploring ways to avoid criminal prosecution and limit your fines and penalties for offshore accounts you have not declared.

DOJ Seeking More Power to Get Accountholder Information from Swiss Banks

The Department of Justice is currently using the threat of prosecution to get banks to take part in its Swiss Bank Program. The Swiss Bank Program is open to foreign financial institutions that played a role in helping to facilitate tax evasion by U.S. accountholders.

A foreign financial institution not yet under investigation for criminal activities can come forward and voluntarily report to the DOJ what its involvement was in helping accountholders to hide paper trails or otherwise evade their obligations to the IRS.

The banks that come forward will pay a fine and will resolve any potential criminal liability through a non-prosecution agreement. As part of this agreement, the banks are going to be required to cooperate with authorities. This means turning over account-by-account details on their customers with offshore funds.

There have already been three banks that participated in the Swiss bank program, and the IRS expects around 80 total banks will participate. These banks don’t need the coercion of a ratified U.S.-Switzerland tax treaty, although there may be some financial institutions that are holdouts but that would cooperate if the new treaty was ratified to give the DOJ more power.

Accountholders should be concerned about the privacy of their account information, regardless of what happens with the treaty. If you have funds offshore, get in touch with Kevin Thorn, a criminal tax lawyer in Boston, today for advice and information about your options.

For a consultation, contact Kevin E. Thorn, Managing Partner, at ket@thornlawgroup.com or (617) 692-2989